EasyJet PLC (LON:EZJ) founder Stelios Haji-Ioannou has called for the removal of chief executive and chairman for not doing more to prevent the airline burning “a shed load of cash” while its fleet is grounded during the coronavirus pandemic or even when flights begin.
He said the board, led by CEO Johan Lundgren and chairman John Barton, have made a “deliberate mistake” in not terminating a £4.5bn aeroplane order from Airbus as he warned there was “no way” that demand for flights will recover in the next 18 months.
In a statement on his easyGroup website, Haji-Ioannou said that UK taxpayers “should be really worried now that they will not see any of their money back in March 2021”, after the FTSE 100 airline borrowed £600mln as part of the government’s coronavirus support scheme.
The 34% shareholder issued the statement following a half-year trading update from the budget carrier earlier on Thursday that revealed it has liquidity of £3.3bn but would churn through almost all of this if its aircraft remain grounded for the remaining nine months of the year, with a current cash burn of around £30-40mln per week.
EasyJet said it is due to take delivery of six Airbus planes later in the year, making a total of 14 delivered for 2020, Haji-Ioannou said this meant “at least £1.5bn” of cash will be going to Airbus in the next nine months.
Cash burn “will increase”
When flights are resumed, the cash burn will be above current levels, Haji-Ioannou said, as flying half empty planes “will be heavily loss making”.
This tied in with a warning from the International Air Transport Association (Iata) on the same day, which said that all airlines were likely to be forced to leave the middle seat vacant when normal commercial flights resume to maintain social distancing, effectively reducing single-aisle jets slashing available seats from 180 to 120.
With 337 aircraft currently in the fleet expected by the company to rise to 335-342 by September 2020, before falling to 302-332 by September 2021, the airline’s founder said he expected “a lot more” cash will be burned in 2021.
“There is no way the demand for passenger flying in 2021 will be the same as 2019,” he said.
Haji-Ioannou, who has threatened to sue easyJet's executives if the carrier went ahead with the Airbus order, has requisitioned a shareholder meetings to vote on the Airbus deal and remove non-executive Andreas Bierwirth and finance chief Andrew Findlay, said making continued payments to Airbus threatened the very existence of the airline.
Warning to customers
“Holders of easyJet ticket vouchers for future flying should also be worried that they may never get to use them next year and will not see their money back,” the Greek-Cypriot shipping family scion said.
“As a result of this deliberate mistake to affirm the Airbus contract, I will call for the removal as directors of two more of the scoundrels in addition to the other two from earlier requests.”
Earlier, the airline insisted it has “no ability to terminate the contract by reason of force majeure” and argued that if it were to terminate the contract it would have to pay compensation for previous discounts and lose access to support and guarantees for its existing fleet.
If Lundgren, Barton, Findlay and Bierwirth are all removed, Haji-Ioannou said he expected the seven remaining members of the board to promote chief operating officer Peter Bellew to acting CEO to run the “aircraft parking lot” and to serve notice of termination to Airbus.
“Any attempt to operate a fleet of more than 250 aircraft […] is bound to just burn a shed load of cash in 2021,” he concluded.